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The decision to not stage the popular Oktoberfest event in Dublin this year

Festivals Must Beware Ogden Rate-related Premium Impacts

Aug 2019

The decision to not stage the popular Oktoberfest event in Dublin this year, due to an “unprecedented” increase in insurance premiums, is just the latest event cancellation being blamed on Ireland’s claims-heavy compensation culture. But would the British festival scene also suffer, if the price of public and employer liability cover rocketed?

The British festival sector should hold its breath, as liability cover is back in the spotlight through a change to the ‘Ogden Rate’ – a calculation governing sums paid out by insurers in major personal accident-related compensation claims. The rate has been moved from -0.75% to -0.25% and not the 0% or 1% the insurance sector had banked on.

Insurers have set insurance premiums too low in some cases, assuming the Ogden Rate would cease to be a negative percentage. Many now face significant losses in the coming year.

The Ogden Rate is a discount rate that enables the insurer to pay the victim less than the total Court-awarded sum, in the knowledge that, if the awarded sum is invested, the interest earned on it, added to the sum itself, would equate to the total awarded by the Court. The higher the Ogden Rate is, the better it is for insurers.

Having already taken a big financial hit at the start of 2017, when the Ogden Rate moved from 3.25% to -0.75%, insurers are now reviewing figures, to tackle an unanticipated increased cost of compensation payments for those with lifelong injuries or illnesses.

Public and employee liability policies, and any policy with a large element of liability cover within it, are likely to attract big premium increases. Some insurers are already warning policyholders to review their policy limits, as a typical £5m limit may prove inadequate protection.

This situation compounds a general lack of liability protection options, due to some insurers having pulled out of the market. Yet liability protection is a core part of what festival organisers need in their armoury.

In Ireland, event organisers have found new policy restrictions, intended to reduce liability risks, just as frustrating as higher premiums. Any mention of fire displays, fireworks, or activities around water have all met with exclusions, making some activities impossible to include. Should the same occur in the UK, events will need a broker to either argue their case effectively or find them a policy that covers such risks.

But it is probably a hefty premium hike that event organisers fear most. Festivals often run on a financial knife-edge, with surprisingly little profit, once costs such as power, waste collection, sanitation, artists, PRS payments, security and policing are paid. A rise in the cost of liability cover could make an event a non-viable proposition.

Festival organisers must seek out protection earlier, with a broker’s help. Budgeting for a higher-cost policy and considering increasing overall limits for both public and employee liability insurance are also wise moves.

With trip-and-slip, equipment, food safety, sanitation and staging hazards, not to mention legal obligations, festivals cannot overlook the two key covers of public and employer liability insurance. Use our ‘Find a Local Broker’ tool, to get the ball rolling without delay.